Whether you are an importer, exporter or a contractor and you need to fulfill certain liabilities to other counterparties, you may opt for a standby letter of credit.
A standby letter of credit is a written statement of the bank, to:
- Repay money borrowed by the applicant, or advanced to or for the account of the applicant.
- Make payment on account of any indebtedness undertaken by the applicant.
- Make payment on account of any default by the applicant in the performance of an obligation.
The commercial documentary credit differs from the standby credit through the 'performance' of the beneficiary whereas the standby credit supports the beneficiary in the event of a 'default' on the part of the applicant.